21 Things a Trader Must Know (and Do) Part 2

Before I play a game, I like to know who is playing with me or against me, asserts trader veteran Jake Bernstein in his weekly series. Don’t try to day trade S&P futures unless you know the high probability tools used by successful traders.

The 21 rules I’m about to give you are not the same old stuff you’ve heard about and read about for such a long time. They are drawn from my experiences in trading dating back to 1967. In each rule, I will give you a brief explanation of my logic and thought process. If they help you then I am pleased. If they don’t help you then perhaps you have graduated beyond the need for these rules, or perhaps you need to think about them some more.

My rule number one at the very top of the list was given in the previous article of this series.

Don’t trade anything that scares you

What kind of rule is that? You say you’ve never seen it before. Why is it important? (By the way, these rules are not necessarily in order of importance.) If a particular trade or signal or strategy or symbol scares you, it means that you have an emotional attachment to that situation. If you have emotional attachment then you have the possibility of making an emotional decision. Emotional decisions and successful trading do not mix. If a trade scares you then don’t take it.

Know your competition

Before I play a game I like to know who is playing with me or against me. I much prefer to be involved in a game where the probability of winning is in my favor. Some markets and trading strategies are dominated by professional traders, frequently using high-powered computers to tilt the odds in their favor. It is highly unlikely that the individual retail trader can compete effectively in that environment. Find a game, strategy, a procedure, a methodology which you can win. As an example, don’t try to day trade S&P futures unless you know the high probability tools that are being used by successful traders. Finding those tools is a substantial venture in and of itself.

Keep immaculate and complete records of every trade you make

Unless you know everything about every trade you make you will not learn from your mistakes. When I say “everything” I mean absolutely everything. Why you got in, why you got out, when you got in, when you got out, the signals you used, the outcome, what you were thinking, where you went right, where you went wrong, and anything else that might have influenced your decision.

Consider the value of isolationism

More than ever before we are assaulted every second of the day by news. It’s almost unavoidable. Unconsciously it influences your behavior. Given that much of the news is either late, misinformation, disinformation or inaccurate, the news will not help you unless you are using the news in a contrarian fashion.

Understand sentiment and contrary opinion

These powerful psychological forces often reveal significant opportunities in advance of turning points. There are ways to use these concepts objectively. Find them and study them.